So Auditing is the systematic process of objectively obtaining and evaluating management’s assertions related to the company’s economic position and their audited financial statement.
So to conceptualize what we’re trying to do in Auditing is that at the end of every year or annual calendar year, a company will issue something called financial statements.
Those Audited Financial Statement are issued to external users of the company. Banks investor’s bondholder’s federal government age governmental agencies, so they are released to external user’s people outside of the company to make decisions on whether or not to buy hold or sell their positions with that company.
So if you’re an investor, you might look at those financial statements and determine whether or not you’re going to buy more shares. You’re going to hold the stocks that you currently have or then you’re going to sell those shares.
Now those financial statements we as the external users of those audited financial statements can’t just believe everything that we’re given. Hence, we have what we call independent external auditors who will verify and check for the reasonableness of those financial statements well management is going to make assertions, or they’re going to apply declarations to the audited financial statements and us as the external auditors.
A financial audit is conducted to provide an opinion about whether financial Audit statements. Specified criteria state the information is verified. Usually, the rules are international accounting standards. However, auditors may conduct audits of Audited financial statements prepared using the cash basis or some other basis of accounting appropriate for the organization.
In providing an opinion about whether accounting standards fairly state financial Audit statements, the auditor gathers evidence to determine whether the reports contain material errors or other misstatements.
The audit opinion is intended to provide reasonable assurance but not absolute certainty that the financial statements are presented fairly in all material respects and give an accurate and fair view by the financial reporting framework. The purpose of an audit is to provide an objective, independent examination of the financial Audit statements.
This increases the value and credibility of the Audited financial statements produced by the management. Thus increase user confidence in the financial statement reducing vest risk and consequently reduce the cost of capital of the preparer of the audited financial statement.
By the UAE GAAP auditors must release an opinion of the overall Audited financial statement in the auditor’s report. Auditors can issue three types of accounts other than an unqualified/unmodified opinion.
Unqualified auditor’s opinion is the opinion that the Audited financial statement are presented fairly. The qualified idea is that the financial Audit statements are presented fairly in all material respects by UAE GAAP.
Except for a material misstatement that does not however pervasively affect the user’s ability to rely on the financial statements, a qualified opinion can also be issued for a scope limitation that is of limited significance.
Further, the auditor can instead issue a disclaimer because there is insufficient and appropriate evidence to form an opinion or because of lack of independence. In a disclaimer, the auditor explains the reasons for withholding an idea and explicitly indicates that no opinion is expressed.
Finally, an adverse audit opinion is issued when the financial statements do not present justly due to departure from UAE GAAP and the departure materially affects the financial statements overall. In an adverse auditor’s report, the auditor must explain the nature and size of the misstatement and must state the opinion that the financial statements do not present fairly by UAE GAAP.
Financial audits are typically performed by firms of practicing accountants who are experts in financial reporting. The financial review is one of many assurance functions provided by accounting firms. Many organizations separately employ or hire internal auditors.
Who do not attest to financial reports but focus mainly on the internal controls of the organization external auditors may choose to place limited reliance on the work of internal auditors. Auditing promotes transparency and accuracy in the financial disclosures made by an organization.
Therefore would likely reduce such corporations concealment of unscrupulous dealings internationally the international standards on Auditing is an issued by the International Auditing and Assurance Standards Board EOS is considered as a benchmark for the audit process.